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Posting for
Thursday, July 23, 1998
by: Bob Duffin
rduffin@firstam.com
DELIVERY FEES/CLASS ACTIONS/ESCROW AND CLOSING
(Intro by Bert Rush: Received this today from Bob Duffin [Chicago]. This can be a real problem where fees are charged which may be unjustifiable.)
CT has been sued in a class action lawsuit in Chicago based upon the allegation that they have overcharged customers for overnight delivery fees. The two count complaint alleges a violation of the Illinois Consumer Fraud and Deceptive Practise Act and Common Law Fraud. The plaintiff is reserving rights in the complaint to add additional states following discovery of practises in other state. The issue arises from the charging by Chicago of what is shown on the RESPA as overnight delivery fee and the execution of an authorization by the plaintiff which states "The documentation is to be sent by commercial carrier (express delivery) and the undersigned agrees to pay the fee incurred for said courier service".
Chicago charged the plaintiff a fee of $25.00 which is alleged to be more than the actual fee charged by the courier, in this case UPS.
An interesting response to one of the allegations in the complaint is as follows:
16. On information and belief, Chicago Title did not incur an overnight delivery fee of $25.00 in sending Flaxman's pay-off check to Countrywide.
ANSWER: The Defendant denies the allegations set forth in paragraph 16 of the Complaint. The Defendant further states that if a customer, like the Plaintiff, elects to have CT&T send his/her loan payoff check via an overnight delivery service, CT&T incurs a number of fixed and variable, direct and indirect, expenses, including but not limited to, the cost of preparing the loan payoff check envelope or package for delivery, the third-party vendor charge for delivering the envelope or package, and cost the of tracking the envelope or package once it leaves CT&T's control to ensure that the envelope or package arrives in a timely fashion. CT&T also "insures" the delivery of the envelope or package because CT&T pays any additional interest due and owing the previous lender if the overnight delivery service fails to deliver the loan payoff check in a timely manner".
In light of this case, it might be a good time to examine our own practises regarding charges for overnight delivery fees passed through to customers.
**********
Following last Thursday's posting, Jim Dondero (Grand Rapids) writes:
Such charges ALSO remain a "dicey issue". Interesting to note CT&T's answer regarding the extra administrative costs (i.e. other than the raw fee charged by an outside courier service) and the assumption of risk for any additional interest charges, which we all incur on a regular basis. These certainly seem to be reasonable and justifiable considerations in setting our charges -- hope the Court sees it that way.
We have a class action suit currently pending against us in Kent County Circuit Court concerning our charge to sellers and borrowers of a $9.00 fee to record a "discharge to come" from their mortgagee(s) (ask Tim Sullivan). Lenders are under a statutory obligation in Michigan to prepare and record a discharge at their own cost, but seldom include the recording fee. Real estate settlement agents are under no such obligation to incur this cost, yet we have discontinued the practice (and will henceforth eat those costs) as a result of this lawsuit.
These class action suits are MOST troublesome! The disruption and time demands of discovery alone place a tremendous burden on an industry that is already overwrought with administrative and regulatory burdens. We can only hope that judges will see them for what they are -- unadulterated greed by plaintiffs' counsel in an attempted "big money grab" -- and thump them for defense costs and other sanctions a la DURR v. INTERCOUNTY TITLE OF ILLINOIS, No. 93-1851, which the Seventh Circuit affirmed (14 F.3d 1183).
Query: I wonder how plaintiffs' counsel would feel about a class action suit against their law firm for over-charging clients for copy, phone, courier costs, etc. over the last 50 years! Maybe we should retaliate in kind!
Reply to Jim: As claims handlers, we're not supposed to use words like "retaliate." I'm working on a case now where class action plaintiffs' counsel did get sued--and it's just made matters worse. The class action lawsuit was filed in the `80's (in CA) attacking the fee structure throughout the industry for trustee's sale guarantees ("TSG's"). There was a settlement in `9l, whereby all the companies agreed to give a discount on the TSG fee where the delinquent borrowers cured before the notice of sale was mailed. Problem was a lot of independent trustees didn't claim the discount for their trustor/borrowers, and some of our competition didn't spread the word to their branches and agents--so enforcement was spotty. In 1995 plaintiffs' counsel filed a motion to re-open the case and pursue all the title company defendants for non-compliance with the settlement agreement. Some additional discovery was done, and First American got out of this part of the action since plaintiffs' counsel couldn't prove substantial non-compliance by First American (Tom Kelley did a great job of getting the word out about the settlement back in `91). The order letting us off the hook is now on appeal. Meanwhile, yet another plaintiffs' counsel has appeared and filed a new class action against the original plaintiffs' counsel--for legal malpractice in structuring an unworkable settlement agreement and failing to achieve compliance. Now we're having trouble settling up on the issues now on appeal, because original plaintiffs' counsel are having to deal with (and include) the new plaintiffs' counsel in settlement discussions. A three-way brawl!$!$!$
